2011 Investment Climate Statement - Suriname

2011 Investment Climate Statement

Bureau of Economic, Energy and Business Affairs

March 2011

Report

Overview of Foreign Investment Climate

In August 2010 Suriname swore in a new government that has not only welcomed Foreign Direct Investment (FDI) into the country, but has repeatedly expressed a need for it in order to further develop Suriname. The Government of Suriname (GoS) has identified its newly established Investment and Development Corporation Suriname (IDCS) and the Ministry of Foreign Affairs as its primary institutions responsible for attracting foreign investment to Suriname. The new government has also announced plans to improve the investment climate through reducing the time and cost involved in establishing a business, and the introduction of a new investment law.

Through its embassies the GoS also intends to embark on a robust campaign to attract foreign investment to Suriname.

In January 2010 Standard & Poor’s (S&P) reaffirmed its sovereign credit rating for Suriname at B+/Positive for foreign currency and BB-/Positive for local currency. Major strengths cited for a positive outlook were the continued efforts to improve debt management, and favorable medium term economic prospects stemming from strong foreign investor interest in the main sectors of Suriname’s economy. The major weaknesses identified by the S&P report are institutional weaknesses, which include deficiencies in debt payment and difficulties involved in reforming the large and inefficient public sector, and an economy still too vulnerable to adverse external developments. Following the May 2010 elections S&P affirmed its positive outlook and B+ rating, citing that even though the political landscape had changed drastically it did not expect the economic landscape to follow suit. S&P further indicated that it could raise its foreign currency credit rating to BB- if, among other things, the GoS repaid its debt to the United States and monetary and fiscal policy remained stable.

Since the May S&P report, however, Suriname’s fiscal outlook has changed substantially. A November report from Suriname’s Debt Management Office (DMO) indicates that the GoS had exceeded the ceiling of 15 percent of GDP on domestic debt, and that this ratio stood at 16.76 percent of GDP per September 30. In order to resolve this issue the National Assembly approved a request from the GoS to amend the Law on Government Debt to allow for an increase in the ceiling of domestic debt from 15 percent of GDP to 25 percent of GDP, while the ceiling on foreign debt was reduced from 45 percent of GDP to 35 percent of GDP. This amendment to the law has given the GoS 10 percent or SRD 892 million room to borrow on the local market.

Per September 30, 2010, Suriname’s foreign debt was US$ 645.7 million or 20.11 percent of GDP. The most notable outstanding bilateral debt continues to be the debt to the United States which is currently at approx. US$ 35 million. The majority of this debt is comprised of late fees and interest penalties. Discussions aimed at working out a repayment agreement are ongoing.

A draft budget for 2011 to be presented to the National Assembly in January 2011 is expected to show a deficit of 22 percent, significantly higher than the historical average of 3 percent. In order to reduce this projected deficit the GoS has announced the introduction of measures aimed at boosting government income. These include an improved tax collection system, increased taxes on the mining sector, and the introduction of measures aimed at ensuring everyone pays taxes in some form. The remainder of the deficit is expected to be covered by borrowing and an increased and more efficient use of multilateral financial sources.

Preliminary figures from the Economic Council for Latin America and the Caribbean (ECLAC) show an estimated growth of 3 percent of Suriname’s GDP in 2010. This is below the 6.6 percent average calculated for South America, but far ahead of the 0.5 percent calculated for the Caribbean. The growth is being attributed to the continued and increased demand for gold and oil. Suriname’s economy also had been less affected by the recent recession than had other Caribbean countries. ECLAC further predicts that Suriname’s economy will continue to grow in 2011, but at a smaller rate of 1.1 percent.

Currently, all investments, both foreign and local, are subject to the same standard laws that govern daily trade. Larger, multi-million dollar investors have been able to negotiate separate terms with the GoS.

The judicial system upholds the sanctity of contracts, but the processing of cases is hampered by tediously long processes in the judicial system. As of January 2011 there are 16 active judges for the entire country, fewer than necessary for the Court of Justice’s case load. The next group of nine judges is not expected to have its training completed until 2012. Since 2009 the Court has been implementing a more specialized case handling system which has helped in the processing of smaller cases.

There is no economic or industrial strategy that has a discriminatory effect on foreign investors or foreign-owned investments, except the oil sector. This is also the sector where, by law, ownership is limited to the State Oil Company Suriname, better known as Staatsolie. Staatsolie has sole ownership of all the country’s oil-related activities. Access to this sector is only possible through Exploration and Production Sharing Agreements with Staatsolie. All other sectors are open to foreign ownership. In those cases foreign companies, like local companies, are required to register with the Chamber of Commerce and Industry, and obtain appropriate licenses as necessary.

Unless requesting special investment incentives, smaller foreign investments are not subject to more screening processes than local companies. Standard screening is usually done by the Chamber of Commerce and Industry. Larger/major investments are subject to screening by the Ministry presiding over the specific sector the investment is in. The potential investment will be screened by a special commission, in which case all necessary financial and legal documentation will also need to be presented for review. Major investments, particularly in the mining sector, go through extensive negotiations processes to determine the terms of investment. In all cases, small or large, filing is mandatory. The purposes and criteria for screening of investments vary depending on the nature of the investment, but are primarily meant to assure that the investment is within the legal parameters of trade legislation. This screening process usually takes place at the beginning of the investment process. Once the business is running, secondary screening is unlikely due to lack of capacity within the departments responsible for screening.

Caribbean Single Market and Economy (CSME) countries theoretically have MFN status over other foreign investors; however, in light of the need for foreign investment in most Caribbean economies, it is highly unlikely that larger international firms would be denied investment opportunities in practice. The Economic Partnership Agreement (EPA) signed with the European Union has also given European companies better market access to the CARIFORUM countries. There is no entity in Suriname that regulates competition.

There is no discrimination specifically targeted at foreign investors at the time of the initial investment or after the investment is made, such as through special tax treatment, access to licenses, approvals, or procurement. In practice, different investors (both foreign and local) are offered different deals at the discretion of the GOS, as represented by the ministry negotiating the deal. Furthermore, in major investments, investment benefits are usually obtained through negotiations with the government and can change depending on sector and the company’s negotiating strength.

There are no current privatization programs of parastatal entities. In past privatization attempts the GoS had indicated a preference for foreign investors to take over the parastatals. Processes and bidding criteria have been transparent and primarily conducted with the assistance of international consultants. Suriname’s new government has indicated that it would place all shares of ailing parastatals under the management of the Investment and Development Corporation Suriname. The intent is to have this entity attract the necessary investment, locally or internationally, to revamp these parastatals.

Suriname’s economy is expected to continue to be very dependent on its extractive industries. In the oil sector, Staatsolie booked gross revenues of US$568 million in 2010, up 32 percent from earnings in 2009 and only US$8 million below its record earnings in 2008. The company further saw its gross profits increase by 57 percent to US$285 million. The successes of 2010 were primarily due to increased production and favorable world market prices for fuel. The average price per barrel earned in 2010 was US$72 compared to US$57.66 in 2009. The company transferred US$186 million to the GoS in dividends and taxes. Total oil production for 2010 was 5.8 million barrels. Staatsolie is in the midst of implementing a US$1 billion expansion program. 75 percent of the investment capital will come from company earnings, while a total of US$275 million will be borrowed from banking giants ING Bank, Credit Suisse and other regional banks. A separate local bond issuance was oversubscribed by approximately 300 percent, yielding US$55 million.

The expansion program includes the doubling of the capacity of the refinery to 15,000 bpd by 2013, expansion of the Staatsolie Power Company Suriname’s power generation capacity from 14 MW to 28 MW, and launch of a pilot project to produce ethanol from sugarcane. The first phase of the Tapa-Jai Hydro-power project is currently in its final research phase and, if executed according to plan, has the potential to produce 60 MW of power by 2014. Additionally, international partners Murphy Oil and Teikoku have commenced test drilling in their respective blocks off Suriname’s shores. The State Oil Company Suriname has also signed a Production Sharing contract for Block 47 with Tullow Oil. The State Oil Company Suriname is in the process of converting itself from an oil company to an energy company.

In the gold sector the GoS has announced that later this year it plans to sign an agreement with Surgold, a joint venture company between Alcoa subsidiary Suralco and Newmont Mining Corporation, for the mining of gold in the Merian area in southeastern Suriname in the Nassau Concession and the building of a second gold refinery. This agreement had been under negotiation since 2008. The proven reserves in this area are 3 million troy ounces. At the country’s first gold refinery, Rosebel Gold Mine (owned by Canadian mining giant Iamgold), production for the first nine months of 2010 was 276,000 troy ounces at an average production cost of US$499 per troy ounce. The company invested approx. US$49 million in exploration. In December 2009 the proven reserves at Rosebel were 2.6 million troy ounces, while the probable reserves were an additional 2.2 million troy ounces.

In January 2011 the GoS embarked on an ambitious plan that will seek to order the informal gold sector. Once considered small-scale this untaxed and unregulated sector is currently estimated at US$1 billion annually. Thousands of Brazilians, mostly illegal, and local Maroons (indigenous descendents of those who escaped slavery by fleeing into the rain forest) find employment in this sector. Chinese shop owners have also set up businesses, also unregulated, near the mining sites. The GoS has set up different commissions to deal with organizing and registering miners, developing legislation to regulate the sector, and to work on making this sector not only sustainable, but also environmentally safer. In the first instance the miners, owners of equipment, concession holders and all others with activities in the sector have been asked to register with a special registration office set up by the GoS. The government also intends to establish special one-stop centers in the interior for miners to conduct all their activities with the government.

In 2010 Alcoa subsidiary Suralco continued to be the 100 percent owner of all activities in the bauxite sector. Production levels dropped by 40 percent, however, due to the expected exhaustion of bauxite reserves in its Kaaimangrasie and Klaverblad mines. Suralco expects to have a new mine in the Nassau concession ready for production by 2013. In the meantime the GoS has expressed an interest in resuming talks with Alcoa/Suralco concerning the bauxite reserves in the Western Bakhuys Region of Suriname. This area is projected to have reserves that could support the bauxite sector for another 40 years.

Shortly after taking office, the new government installed a Rice Commission. The primary task of this commission is to increase rice production and exports, returning rice to the place it once held on Suriname’s list of export products. The Commission has developed a 7-point emergency plan that should contribute towards increasing Suriname’s rice production from 26,000 hectares (currently) to 40,000 hectares in 2013. The plan includes the overhauling the irrigation of the rice fields, upgrading equipment, and improving production processes. The two major markets this increased production is expected to serve are Venezuela and Brazil. A recent ruling by the Caribbean Court, rejecting Jamaica’s request to import rice from the United States instead of first seeking to import rice from other CARICOM members, can also benefit Suriname’s rice sector as Jamaica will become a potential market for Surinamese rice.

Suriname’s banana sector continues to struggle despite the millions invested in this sector by the European Union. In 2010 the company managed to export a record 70,000 tons of bananas, and tentative figures show the company managed to book its first profit in 15 years of US$4 million. The pressure on the sector’s continued existence comes from continuous labor issues in this sector – multiple strikes having caused the company to lose approx. US$180,000 for each day of strikes. The company employs 2,500 persons.

Other sectors that have been identified for investment potential are transport, heavy equipment, tourism, environmental protection, ICT, the services sector, agriculture, and education.

Measure

Year

Index/Ranking

TI Corruption Index

2009

75

Heritage Economic Freedom

2010

131

World Bank Doing Business

161

161

Suriname is not a Millennium Challenge Corporation (MCC) country.

Conversion and Transfer Policies

There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, lease payments) into a freely usable currency at a legal market clearing rate. Permission is required from the Foreign Exchange Commission to transfer any funds associated with a business or investment out of Suriname. There have been no changes, nor are there plans to change, remittance policies pertaining to the access to foreign exchange.

In 2008 the Foreign Exchange Commission repealed the General Decrees 106 of 1960 and 153 of 1977. General Decrees are the laws that govern Foreign Exchange in Suriname. Under the new General Decree 217 of 2008, the Foreign Commission decided that banking institutions would be permitted to open accounts for non-residents and conduct transactions on behalf of these non-residents, in all foreign currencies for which the Central Bank of Suriname has an official exchange rate vis-a-vis the Suriname Dollar. The documents of accounts, however, must clearly indicate the country of residency and the country of residency of the headquarters of the parent company. The general license does not apply to transactions of foreign currencies originating from the exports of minerals and/or transactions that are the result of such an export, unless a special license is granted or another law so permits. Banking institutions are required to provide the Central Bank of Suriname all necessary information regarding any transactions in order to assist in the Central Bank’s oversight responsibilities of foreign exchange transfers to and from Suriname, as well as ease the balance of payments with other countries.

In 2010 there was a temporary difficulty in obtaining foreign exchange. Fueled primarily by concerns about potential political instability and by speculation, the open market exchange rate spiked from SRD2.93 = US$1.00 in early January 2010 to almost SRD4.00 by November 2010, while the official Central Bank exchange rate remained at SRD2.80 = US$1.00. The Central Bank of Suriname (CBvS) opted not to change the official rate, however, and in November the CBvS made foreign exchange (U.S. Dollars and Euros) available to businesses, primarily importers, at a rate that was below the open market rate, yet above the official bank rate. Since then importers can, through their commercial banks, apply for funds from the CBvS by submitting the necessary invoices. Funding is made available at the discretion of the CBvS. This mechanism is still ongoing and has eased the pressure on the open market, causing the exchange rates to stabilize at SRD3.45 = US$1.00 and SRD4.60 = 1 Euro.

The delay period varies for remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties and management fees, but is relatively short. Permission must first be obtained from the Foreign Exchange Commission. The time needed to process the request depends on the sector and the amount to be transferred. Transfers through the banking system can range from same-day transfers to one week. Investors can remit through the legal parallel market. A source of origin must be declared, however, in cases where the incoming or outgoing amount exceeds US$5,000 or 5,000 Euros. No limitation exists on the inflow or outflow of funds.

Expropriation and Compensation

The GOS is granted limited authority for expropriation under Article 34 of the Constitution. According to the article:

“property, of the community as well as of private persons, shall fulfill a social function. Expropriation shall take place only for reasons of public utility according to the rules to be laid down by law and against previously assured compensation. Compensation need not be previously assured if, in case of emergency, immediate expropriation is required. In cases determined by or in virtue of the law, the right to compensation shall exist if, in case of public interest, the competent authority destroys or renders property unserviceable or restricts the exercise of property rights.”

No single sector is at a greater risk of expropriation than others; although Article 41 of the Constitution specifically refers to all natural resources as being the property of the nation, and states that the nation has inalienable rights to take complete possession of all natural resources in order to utilize them for the needs of the economic, social, and cultural development of Suriname. There have been no expropriation actions in the recent past, however, nor policy shifts that would lead one to believe that expropriation is likely to take place. There are no examples of “creeping expropriation” or government action tantamount to expropriation.

The crude oil sector is entirely state-owned. The Petroleum Law of 1990 allows state enterprises to enter into contracts with third parties for the prospecting, exploration and exploitation of petroleum, subject to approval by the government. Under the Mining Decree of 1996, mining rights for radioactive minerals and hydrocarbons can only be obtained by state-owned enterprises.

Dispute Settlement

Suriname’s legal system is based on the Dutch Civil System. Laws are laid down in criminal, civil, and commercial codes and verdicts are based on the judge’s interpretation of these codes. There is no government or political interference in the judicial system, and judges are generally considered to be impartial.

Every effort is made to settle investment disputes outside the court system or via appointed arbitrators. There are currently 16 active judges, far less than necessary for the country’s entire case load. A new group of judges is not expected to have its training completed before 2012. Issues within the overall judicial system do hamper a timely conclusion of issues. There have been no publicly known investment disputes over the past few years involving U.S. or other foreign investors or contractors in Suriname.

Judgments of foreign courts are accepted and enforced by the local courts only if Suriname has a legal treaty of jurisprudence with the foreign country involved. If not, the foreign judgment can be brought before the Surinamese court for consideration as long as the court determines it has jurisdiction and doing so does not otherwise violate any Surinamese laws. Suriname has no legal treaty of jurisprudence with the United States. With Suriname’s participation and membership in the Caribbean Court of Justice, judgments from this court are also binding for local courts. Cases have been successfully filed against Suriname before the Inter-American Court of Justice and the Organization of American States. Judgments from these courts have been upheld by the Surinamese legal system.

Suriname has consistently applied its commercial and bankruptcy laws. Companies have a right to file for bankruptcy with the courts. All records of debts are subsequently filed with a trustee as appointed by the court. The judge may declare bankruptcy in cases where there are a minimum of two creditors. In cases where there is a loan from a commercial bank, payment on this loan takes precedence. Monetary judgments are made in local currency, unless the contract or agreement stipulates otherwise.

The government accepts binding international arbitration only if it is stipulated in the contract or agreement and if it does not contradict any local laws. International arbitration is accepted as a means for settling disputes between private parties, but only if local alternatives have been exhausted. Most agreements involving foreign companies have clauses that clearly stipulate the laws applicable to the agreement.

Suriname has been a member of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1964 when the country was still a Dutch territory. At independence in 1975, Suriname automatically continued its membership in international conventions and treaties.

Performance Requirements/Incentives

Suriname is a member of the World Trade Organization. Suriname does not impose any performance requirements, nor does it provide any performance incentives, that would be inconsistent with Trade Related Investment Measures (TRIMS) requirements.

No performance requirements are imposed as a condition for establishing, maintaining, or expanding investments, or for access to tax and investment incentives. There are no requirements that investors purchase from local sources or export a certain percentage of output. Both local and foreign investors, however, have found it useful to purchase from local sources and import only those goods unavailable on the local market. Larger companies (e.g., the mining companies) have signed contracts for the delivery of products that are not readily available on the market. In the case of foreign investments, no requirements exist that nationals own shares or that the share of foreign equity be reduced over time, or that technology be transferred. Suriname does not impose any “offset” requirements, which would force foreign suppliers to invest in manufacturing, R&D, or service facilities in order to receive procurement approvals. With regards to the telecommunications sector, the government did require the companies Digicel and Uniqa to deposit US$1 million each in a performance bond as a guarantee that the companies would provide the services for which they had requested licenses.

In order to operate a company, investors must obtain a special industry license. There are no special requirements on percentage of local content or equity. No requirements exist for substitution for imports, nor for export targets. Investors are not required to use specific employment agencies, nor to transfer technology or use local sources of finance. In order for an investor to receive permission to hire a foreign national, the investor needs to show the Ministry of Labor that every effort was made to hire a host country national first. The rule does not, however, apply to specialists; in that case the company is free to use whomever it deems necessary for the operation of the company. The specialists must obtain work permits.

Exceptions have been made to the requirement that Surinamers be hired first. The GoS has signed contracts with Chinese companies for construction and infrastructure projects which, through negotiations, included in the contracts the stipulation that Chinese nationals be allowed to enter Suriname to work in jobs that host country nationals could have performed.

U.S. and other foreign firms are welcome to participate in research and development. Larger foreign investors, such as the Alcoa subsidiary, Suralco, have played a major role in the establishment and maintenance of research facilities at the Anton de Kom University (Suriname’s only university).

In 2009 Suriname’s National Assembly passed new legislation regarding the issuance of work permits to foreigners. Although the procedures remain the same, a foreign worker must apply first for a residency permit at the Ministry of Justice and Police, after which s/he can apply for a work permit at the Ministry of Labor. The new legislation limits the term of a work permit to three years, in order to make it possible to better track the movement of foreign workers in Suriname, and to prevent foreign workers from obtaining employment that can regularly be done by Surinamese citizens. The new legislation also introduced a permit requirement for interns. This is also meant to prevent interns from getting jobs that can regularly be done by a Surinamese citizen. Companies or organizations that want to employ interns are now required to request the permit on behalf of the intern. The free movement of artists, university graduates, media workers, musicians, and sports persons of CARICOM origin is arranged through the CSME regulations. CSME regulations also provide for the free movement of those wanting to establish or conduct business within the community.

Non-tariff barriers on both imports and exports include: proof of residency, registration with the Chamber of Commerce, Customs’ import registration numbers, and tax identification numbers from the Tax Office of the Ministry of Finance. Under the 2003 Law on the Movement of Goods, “the Ministry of Trade and Industry created “negative lists” for both imports and exports. In theory, anything can be imported or exported without a license unless it is included on the “negative lists.” Items included on the “negative lists” may only be imported or exported with special permission from the government. Examples of goods on the negative list for imports are: chemicals, pesticides, and animals on the Convention of Endangered Species and Faunas List. Examples of goods on the negative list for exports are: bark wood, explosives, gold, and other precious metals.

Tariff barriers include consent and statistical fees charged in addition to regulatory import duties. An amendment was made on the issue of consent fees in 2008 as the Foreign Exchange Commission, through General Decree 216, waived all consent fees in all cases where the Ministry of Finance has already exempted or suspended import duties. Imports from countries outside CARICOM, except the European Union, are subject to increased import duties due to the Common External Tariff (CET) adopted by CARICOM members. Imports are subject to a 7 percent turnover tax as stipulated under the 1997 Law on Turnover Tax. Exports are subject to consent and statistical fees. Companies in the bauxite sector pay a 2 percent statistical fee on both imports and exports. In the gold sector the royalties are 2.25 percent, with an additional 6.25 percent if the price of gold exceeds US$425 per troy ounce. A statistical fee of 0.5 percent is also applied on the export of timber (except to CARICOM countries).

CSME regulations also prevent its members from importing products from outside of CARICOM if the same quality goods can be produced or delivered by fellow member states by a pre-set deadline, not taking price into account. Violation could lead to a case being filed at the CARICOM Secretariat. In 2008 the CARICOM Secretary General, based on a decision by the 19th Inter-Sessional Meeting of the Conference of Heads of Government of the Caribbean Community, gave member countries permission to partially or completely suspend import duties on products from outside the Community for one year. In 2009 the GoS extended this suspension for another year. Cases were filed against Suriname by both the Trinidadian cement producer TCL and a Trinidadian grain miller against the import of cement and flour from non-CARICOM countries. In both cases the plaintiffs successfully argued their cases, and Suriname was ordered to reinstate the CET. By July 2010 all tariff suspensions were lifted.

In October 2008, Suriname, as a member of the CARIFORUM, signed an Economic Partnership Agreement (EPA) with the European Union. Under this agreement the CARIFORUM countries have agreed to have all goods from CARIFORUM states, except rice and sugar, enter the European market duty and quota free. Parties have also agreed on a three year moratorium before reducing import duties on goods imported from the European Union in 2011. In 2011, they will introduce a gradual scheme of reduction of duties over a period of 25 years. Parties have also agreed that in order to protect the fragile economies of the CARIFORUM states, 13.1 percent of goods imported from the EU will be placed on an exclusions list, meaning that duties will never be reduced or eliminated on these products. Parties have further agreed to extend to each other any treatment or benefit that is provided to a third party through a Free Trade Agreement (FTA) signed after this EPA.

Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. Once private entities have registered their business with the Chamber of Commerce and Industry (KKF) they have the right to freely acquire and dispose of interests as they see fit. Competitive equality is the standard applied in competition between private enterprises and public enterprises with respect to access to markets, credit, and other business operations, such as licenses and supplies. In practice, private enterprises even have better access to markets and credit since they are more flexible and have a less bureaucratic decision-making hierarchy.

Protection of Property Rights

Secured interest in property, both movable and real, are recognized and enforced. The concept of mortgages exists, and mortgages are registered by the Mortgage Office. Acquisition and disposition of all property rights are protected and facilitated by law.

Even though Suriname is a member of the World Trade Organization (WTO) and, since 1975, a member of the World Intellectual Property Organization (WIPO), it has not ratified the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement. While Suriname is officially party to the following international agreements on intellectual property rights, which came into force when it was still a colony of the Netherlands, there is little or no adherence to these agreements since they are not incorporated into the country’s domestic legislation:

- the Paris Convention for the Protection of Industrial Property (1883)

- the Berne Convention for the Protection of Literary and Artistic Work (1886)

- the Hague Convention concerning the International Deposit of Industrial Designs (1925)

- the Nice Agreement concerning the International Classification of Goods and Services for the Purpose of Registration of Marks (1957)

- the Strasbourg Agreement concerning the International Patent Classification (1971)

The Ministry of Justice and Police presides over the Bureau for Intellectual Property Rights and has on several occasions mentioned its intent to improve the country’s legislation on this issue. So far, however, intellectual property rights have not received a high level of attention from legislators. A basic Intellectual Property Rights law was prepared in 2004 and was presented to the National Assembly. This draft law, however, never made it onto the legislative agenda for discussion and approval. Subsequently, the draft law was retracted for revisions and has not yet been resubmitted. More advanced and specialized legislation (e.g., brand and music piracy, industrial property and associated rights) was supposed to be added to the basic legislation once it was approved.

The current legal framework for discussing copyrights, patents, and trademarks dates back to 1912 and 1913, and is an amendment to a previously written law. Neighboring rights (related rights) in copyrights, geographical indications, industrial designs, and utility models, layout designs of integrated circuits, undisclosed information, or new plant varieties remain unprotected.

The WTO TRIPS agreement has been neither implemented nor enforced even though the Ministry of Justice and Police has indicated its intention to do so. Suriname has signed the WIPO Internet Treaties, but has not ratified them.

Transparency of the Regulatory System

No tax, labor, environment, health and safety, or other laws or policies are purposely used to impede investments. This does not, however, mean that they do not form obstacles for investment. Labor laws, for instance, prohibit employers from firing an employee without the permission of the Ministry of Labor, once the employee has fulfilled his or her probationary period. Tax laws have also been criticized for overburdening the formal business sector while there is an entire informal sector, estimated to be roughly twice the size of the formal economy, which goes untaxed. The new government has indicated that it intends to completely overhaul the tax system by 2013, changing it from an income based system to a consumption based system. Under the proposed system a flat income tax will be charged, while consumers will start paying a value added tax.

Bureaucratic procedures, including those for licenses and permits, are neither sufficiently streamlined nor transparent. The large number of civil servants involved in the process of granting licenses not only makes it a lengthy process, but also invites corruption. Both the World Bank, through its “Doing Business Report,” and Standard & Poor’s have identified the government’s involvement in the real economy as an undue burden that not only undermines policymaking transparency but gives rise to corruption.

Laws and regulations are drafted in consultation with the relevant stakeholders in both the public and private sectors. After this, they are presented to the Council of Ministers for discussion and approval. Once approved, they are sent to the President’s advisory body, the State Council, for approval before being presented to the National Assembly for discussion, amendment, and approval.

All regulatory processes go through the government. Nongovernmental organizations have an advisory role in some instances. Legal, regulatory and accounting systems are transparent and consistent with international norms.

In 2007 a Standards Bureau was officially established. In its first year of operation the Standards Bureau primarily focused on hiring qualified personnel and organizing seminars on the topic. In 2009 it started working with local businesses on identifying needs for standards. Because of the time it has taken to develop this system, companies have hired international consultants or private firms to assist in certifying processes based on the ISO system. In 2010 the Standards Bureau has worked with stakeholders in different sectors and the Anton de Kom University of Suriname on starting the process for developing standards for these sectors.

There are no private sector and/or government/authority efforts to restrict foreign participation in industry standard-setting consortia. In most instances foreign participation is not only welcomed, but requested in order to bring standards in Suriname up to international norms.

Efficient Capital Markets and Portfolio Investment

Sufficient policies exist to support the free flow of financial resources in the product and factor markets. Credit is allocated on market terms and at market rates. Once established as a business in Suriname, foreign investors are able to get credit on the local market, usually with a payment guarantee from the parent company. The private sector has access to a variety of credit instruments. Larger companies can obtain customized credit products. There is, however, a Central Bank regulation that limits commercial banks’ credit exposure to a single client.

Lending rates have remained relatively stable over the past years. The corporate lending rate for local currency has floated between 11 percent and 14 percent, depending on the project and client. The lending rate for US dollars and Euro loans is between 9 and 15 percent.

Although there was a slight increase in non-performing loans between 2008 and 2009, the IMF continues to feel confident in the strength of Suriname’s major commercial banks. In 2009 private credit growth decreased steadily from 42 percent in 2008 to 18 percent. The Central Bank of Suriname has kept the effective reserve requirement for local currency at 25 percent, while the reserve requirement rate for foreign deposits is 40 percent.

The increase in the government’s capacity to borrow within Suriname, by increasing the domestic debt ceiling to 25 percent of GDP, will place some pressure on the available lending liquidity in the market. Although the government has several lending options at its disposal, the commercial banks continue to be the sole source for immediate short term borrowing. As shareholder of two of the three largest commercial banks, the government has increased access to these banks resources.

The estimated total assets for the three major commercial banks were:

-- DSB Bank (as of June 30, 2010): US$ 745.9 million

-- Hakrinbank (June 30, 2010): US$ 405.3 million

-- RBC - RBTT (October 31, 2010): US$ 2.8 billion.

(In 2008 the Royal Bank of Canada took over the Royal Bank of Trinidad and Tobago, parent company of RBTT Bank Suriname. Financial figures for this entire group are consolidated into the financial figures of RBC. Above asset figures reported are the assets in international holdings, other than U.S.)

Competition from State-Owned Enterprises (SOEs)

Private firms compete under the same terms and conditions as public firms for access to markets and credit. State Owned Enterprises (SOE) do have an advantage in access to other resources such as land.

SOE are active in the oil sector, airline sector, electricity and gas supply, water, bananas, rice, telecommunication, banking, and transport sectors. The government also owns several “authorities” that operate like regular businesses. The only SOE with private capital invested is the State Oil Company Suriname that, through bond issuance in 2010, borrowed US$ 55 million from private investors.

These companies are in most cases managed like regular companies with a Supervisory Board. Members of these Supervisory Boards are appointed by the government. These companies do consult with the respective ministry presiding over the sector on business decisions and major decisions require government approval or consent.

Suriname has no Sovereign Wealth Fund.

Corporate Social Responsibility (CSR)

There is a growing awareness of corporate social responsibility among both producers and consumers. The trend was started by Alcoa subsidiary Suralco and has since been adopted by other larger companies in Suriname. Consumers have taken note of this trend and, particularly some nongovernmental organizations have been depending on this for survival. Firms who follow this model have been viewed more favorably. Locally owned companies that also stand out for their corporate social responsibility include: the State Oil Company Suriname, Surinam Airways, Telesur, Fernandes Group of Companies (largest local soft drinks bottler), and McDonalds Suriname.

Political Violence

There have been no incidents over the past few years involving politically motivated damage to projects and/or installations. In November 2007, 25 defendants, including now current President Desire Bouterse, went on trial for the December 8, 1982 murders of 15 prominent democracy activists. This case is still ongoing.

Corruption

No U.S. firms have reported corruption as a major obstacle to foreign direct investment. Suriname has signed and ratified the Inter-American Convention against Corruption. Suriname has not yet signed or ratified the UN Anti-Corruption Convention. The country is not a signatory to the Organization for Economic Co-operation and Development (OECD) Convention on Combating Bribery.

The Ministry of Justice and Police is responsible for combating corruption. The Fraud Department of the National Police is in charge of investigating corruption cases. The government has also established an Anti-Corruption Working Group at the ministerial and technical levels to assist the police in combating corruption. No international, regional, or local nongovernmental anti-corruption “watchdog” organization operates in Suriname. The country is not ranked on the 2010 International Transparency Index. It was ranked 75th out of 180 countries in 2009.

Suriname does not have special anti-corruption legislation in place, but the penal code does refer to anti-corruption. Under the previous government the Ministry of Justice and Police had drafted anti-corruption legislation, but this draft has thus far not been discussed by the National Assembly. Several of the current members of the National Assembly have indicated support for enacting this law as soon as possible. The anti-corruption measures in the penal code are being enforced, with the bulk of those prosecuted for corruption to date being civil servants. Corruption is most pervasive in the areas of government procurement, license issuance, land policy, and taxation.

Accepting or giving a bribe is a criminal act, which is punishable by a fine or a prison sentence of three months to five years, depending on the severity and/or amount of the bribe. A bribe to a foreign official is considered a criminal act and cannot be deducted from taxes.

Although senior government officials state that they take anti-corruption efforts seriously, there is a widespread perception of corruption in parts of the executive branch of the government. Under both the previous and current government the Ministry of Physical Planning, Land and Forest Management appears to be the subject of the most allegations of corruption. Only four months into the term of the sitting government, the Minister of Physical Planning, Land and Forest Management was fired what was deemed improper conduct when it became public that his wife had applied for a public grant of 8,000 hectares of land, a decision that is normally decided by the Minister (although no action had yet been taken on her application). Some have claimed that in fact the Minister was under fire for his investigations into previous corruption in his Ministry.

Bilateral Investment Agreements

Suriname has bilateral investment treaties with Indonesia and the Czech Republic. In 1993, Suriname signed an Agreement on Bilateral Trade Relations with the United States. This agreement has not been ratified by the National Assembly.

Other international agreements into which Suriname has entered are as follows:

-- a double taxation treaty with the Netherlands.
-- a trade agreement with the People’s Republic of China (1998)
-- the Treaty of Chaguaramas, which established the CARICOM and subsequently led to the creation of the CARICOM Single Market and Economy.
-- trade agreements by virtue of CARICOM membership with Venezuela, Costa Rica, Brazil, Cuba, the Dominican Republic, and Colombia.
-- trade promotion treaties with Indonesia, India, and China.
-- CARIFORUM – E.U. Economic Partnership Agreement (This EPA also has some provisions for investment between the 2 regions.)

OPIC and Other Investment Insurance Programs

Suriname is one of the signatories establishing the Multilateral Investment Guarantee Agency (MIGA). Currently there are no Overseas Private Investment Corporation (OPIC) programs in operation in Suriname. In the event OPIC should pay an inconvertibility claim, the official currency exchange rate for the U.S. Dollar is SRD2.80 for US$1. This is the same rate used by the U.S. Embassy. The estimated annual U.S. dollar value of local currency that will be used by the Embassy is US$ 836 thousand.

Labor

Labor unions in Suriname are independent of the government, but play an active role in politics. In 2009 the Government of Suriname introduced a new salary schedule for civil servants. Implemented in two phases, FISO I, the first phase required a complete reevaluation of all positions within the public sector, taking into account the level of responsibility of the function and educational level of the person filling the position, and based on these factors a new salary was then calculated. The new schedule increased the government wage bill by almost 30 percent in 2009. The new government is currently under fire from the unions as it weighs the implementation of FISO II, which has been delayed from originally scheduled 2010. Both local and international economists have warned of substantial inflationary pressures if FISO goes forward in its current form. Additionally, the government has indicated it may not be financially capable of paying for the entire projected wage increase. There is division among the government, labor unions, and other stakeholders over how to implement FISO in 2011.

Some sectors in Suriname are more prone to labor shortages, such as the agricultural sector and service sector, while the more technical sectors, such as mining and communications technology, have a surplus in labor supply. The GoS continues to be the largest employer in country. Suriname is a member of the ILO and adheres to ILO conventions. The Ministry of Labor has for some years been trying to implement a minimum wage system. Actual implementation continues to be hampered by lack of agreement between all stakeholders.

Recent data on the value of foreign direct investment -- Source for the data is the 2010 World Investment Report

FDI Inflow in millions of US$

2007

2008

2009

179

209

151

According to the same report, Suriname had no Direct Investment Abroad between 2004 and 2009.

A list of major foreign direct investments in Suriname follows:

- Once an agreement has been reached, Surgold, the joint venture between Alcoa and Newmont Mining Co., will commence preparations for developing the area for set-up of the industrial complex.
- In offshore oil, Murphy Oil Co. and Teikoku have continued investments in exploratory activities.
- Alcoa subsidiary Suralco continues its investment in the preparatory work for developing a bauxite mine in the Nassau Area.

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